Compute the forecasts for each month

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Reference no: EM131353308

Lenovo uses the ZX-81 chip in some of its laptop computers. The prices for the chip during the past 12 months were as follows:

MONTH

PRICE FOR CHIP

MONTH

PRICE FOR CHIP

January

$1.80

July

1.80

February

1.67

August

1.83

March

1.70

September

1.70

April

1.85

October

1.65

May

1.90

November

1.70

June

1.87

December

1.75

a) Use a 2-month moving average on all the data and plot the averages and the prices.

b) Use a 3-month moving average and add the 3-month plot to the graph created in part (a).

c) Which is better (using the mean absolute deviation): the 2-month average or the 3-month average?

d) Compute the forecasts for each month using exponential smoothing, with an initial forecast for January of $1.80. Use a = .1, then a = .3, and finally a = .5. Using MAD, which a is the best?

Reference no: EM131353308

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